Silver Surge in Late 2025: How China’s Export Controls and Industrial Demand Are Shaping Risk

Recent Market Performance & Short-Term Risks
Silver has seen a powerful uptrend in 2025: up ~156% year-to-date, including ~30% in December alone. [1] However, this rally culminated in sharp downward volatility after the CME Group raised margin requirements for silver futures, forcing speculative positions to unwind. [2] Adding to this, strong U.S. GDP prints bolstered the dollar (DXY), generally a headwind for dollar-priced commodities like silver. [1]

China’s Export Licensing Regime & Supply Implications
Beginning January 1, 2026, China is implementing a government licensing system for silver exports, affecting about 60-70% of the globally traded refined silver supply. [3] Exporters will need to meet eligibility criteria—e.g. ≥80 tonnes annual production and ~$30 million in credit lines. [2][4] Smaller producers or those lacking requisite financial/capacity credentials will be excluded, likely constraining supply internationally as domestic use is prioritized. [3][4]

Physical vs Paper Price Divergence
Physical markets in Shanghai (~$85/oz) and Dubai have shown large premiums over COMEX futures (~$75-80 earlier in the rally, falling with pullbacks), indicating a pricing gap between deliverable and paper markets. [3][1] London OTC silver contracts are in backwardation at the highest levels in decades, and options markets price further upside tail risk. [1]

Structural Demand Drivers
Major sources of demand include the solar industry (projected 290 million ounces this year, rising to ~450 million by 2030), and growing demand from AI/data center build-outs, both reliant on silver’s conductive properties. [1] Attempts to substitute silver with copper for industrial usage are limited due to long pay-back periods (~18 months) and higher break-even costs (e.g. solar needs silver to break even at ~$134/oz, ~70% above current spot). [1]

Strategic Implications & Open Questions
• Supply chain risk rises: countries dependent on imported silver, especially for critical industries, may face cost or sourcing disruptions if Chinese export licensing is restrictive.
• Investment strategy diverges: physical silver and miners likely to benefit from scarcity and premiums; paper instruments increasingly exposed to leverage and margin risk.
• Open questions include how many Chinese refineries/exporters will be approved under the licensing regime; whether physical shortages become acute enough to force mining/capacity expansion; how substitution technology might evolve; and how broader macro forces (dollar strength, interest rates, tax policy) will influence near-term flows.